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Exec: Perelman Weighed Sunbeam Stock Hedge
Monday May 9, 5:59 pm ET
Ex-Executive: Perelman Spent Months Investigating Possibility of Hedging Sunbeam Stock


WEST PALM BEACH, Fla. (AP) -- A former executive at financier Ronald Perelman's main holding company said Monday the company spent a lot of time investigating the possibility of hedging the Sunbeam stock that Perelman was receiving as partial payment from the sale of his company Coleman Inc. to Sunbeam in 1998.
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Perelman, chairman of cosmetics giant Revlon Inc., is suing Morgan Stanley for some $2.7 billion in damages, alleging the investment bank knew of accounting irregularities at its client, appliance-maker Sunbeam, but concealed these in order to facilitate an acquisition of Perelman's stake in camping-gear company Coleman.

Perelman sold his 82 percent stake in Coleman to Sunbeam for $1.5 billion in cash and Sunbeam stock. Shortly afterward, Sunbeam's problems were exposed and the appliance maker's stock plummeted. Sunbeam sought bankruptcy protection in 2001.

In a videotaped deposition taken before trial, Glenn Dickes, former senior vice president at Perelman's MacAndrews & Forbes, said he was one of a number of executives at the company involved in exploring the possibility of hedging its exposure to a decline in Sunbeam stock both before and after the deal closed March 30.

He testified the company had talks with various investment banks including Bear Sterns, Citicorp and Goldman Sachs and that negotiations continued through to the beginning of June 1998.

"The company certainly put a lot of effort into it ... there was a sense of urgency from the beginning," Dickes said.

Dickes said the hedging transaction died because it couldn't be done on terms and conditions attractive to MacAndrews & Forbes.

"We were unable to find a transaction at a price that was attractive enough to get a transaction off," he said.

He added there was also concern that a hedge might fall afoul of Securities and Exchange Commission rules on the sale of stock subject to a lockup -- Coleman shareholders were restricted from selling Sunbeam stock immediately following the transaction.

In testimony earlier in the trial, Perelman denied that the reason no hedge was taken was because of price and said it was because of the legal uncertainties surrounding the sale of restricted stock.

Separately Monday, representatives of Morgan Stanley and Perelman were meeting in resumed mediation talks in an attempt to settle the financier's claim.

World-renowned mediator Kenneth Feinberg is overseeing the court-ordered negotiations and has been given the exclusive right to declare an impasse after settlement talks last Thursday collapsed.

Perelman's counsel Friday claimed earlier mediation talks failed because the Morgan Stanley representative didn't have complete authority to settle.

Morgan Stanley counsel Mark Hansen denied the accusation and said Perelman's team just wanted to get the bank's beleaguered chief executive, Philip Purcell, involved in order to drive up the amount of any potential settlement.





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